What Are Management Rights

“Management Rights” is a term used to describe the on-site management business of an apartment building or unit complex. Many people regard Management Rights as a blue chip investment that offers lifestyle, great returns on investment and good re-sale potential.

The basic principal of Management Rights are:

Caretaking agreement – maintaining the common property on behalf of the Body Corporate (swimming pools, gardens, security) – in exchange for a salary
Letting Agreement – letting of units (holiday or permanent ) on behalf of owners (investors) in the complex / building
Owning a lot in the building designated as the Managers Unit – where the business is run from. This usually incorporates the office / reception area.

Caretaking Agreement

Legal agreement between the RUM (Resident Unit Manager) and the Body Corporate.
The agreement will specify the duties and responsibilities required by the RUM on a day to day, weekly and monthly basis. Some examples of the duties that the RUM does are:

Cleans the swimming pool (daily or weekly)
Cleans the office foyer and other common areas – BBQ, stairwells, lifts etc…
Takes the rubbish bins outside for collection – where applicable
Manages the office – times will depend on type of complex (holiday or permanent)
Liase with Body Corporate
Supervise work done on behalf of the Body Corporate
Supervise work done on behalf of the investors

The contractual agreement is for a specific term from 5 years to 25 years depending of the type of complex / building. If you have a Caretaking agreement – 20 years, then you are guaranteed that you will receive a body corporate salary for 20 years (with CPI increases) for your duties and responsibilities as long as you conduct the business in a satisfactory manner.

Letting Agreement

Legal agreement between the RUM and the body corporate that allows you to conduct a
letting business within your complex.
The RUM has the right to act as on-site Letting Agent for the investor owners wishing to rent their units to tenants. You are paid commission and management fees by the individual unit owners for securing good tenants, collecting rent, and ensuring that the rental property is kept in good condition.

Letting Pool – refers to the total units under your management, representing investor owners properties.   A building may consist of 50 units in the total complex, and you could be responsible for managing 40 of those units. The balance of units (10) may be live in owners or lock ups (Owners who leave the unit untenanted)

Most investor owners prefer to have the RUM manage their investment as you have a common interest in maintaining the value of their investments. Living on site gives you significant competitive advantage over outside agents as you handle all situations straight away. Minor repairs and maintenance of units can be handled straight away without having to engage a tradesman. If there is a problem with a unit, the tenant will generally contact you first.

The term of the letting agreement usually runs concurrently with the term of the management agreement.